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Ofcom has laboured under a number of misapprehensions which have, until now, hampered its ability to engage successfully with the issue. They include its estimate of the size of the PMSE sector; on a related point, its ignorance as to the large number of unlicensed users; and the true value of redundant equipment and of the time needed to re-equip. Recently, though, things have been changing, and Ofcom has been engaging more positively with the sector. The auction process is a sensible mechanism for many sectors interested in the digital dividend review
the DDR. However, for the PMSE community, which has well-established grandfather rights for the use of this spectrum, and is absolutely dependent on access to it, the auction process is unacceptable. Interestingly, one sectorradio astronomyis already rightly protected from the full pressure of the market, so there is a precedent for special treatment.
I have to ask, perhaps on a slightly more partisan note, to what extent this process is being driven by the Chancellor of the Exchequer. With the public finances under pressure, the prospect of a repeat of the staggering success of the 3G spectrum auction in April 2000 must be very appealing, but when he becomes Prime Minister, does he really want to preside over the ending of so much pleasure? It would confirm many peoples prejudices if he did.
The crucial point is that all the other bidders in an auctioneven high-definition televisionwould be new users of the spectrum. Only one existing use is threatenedradio mikes. Those who are providing this crucial service have those grandfather rights. They are already there, providing a service greatly valued by society, and they should be protected in some way. There is no other use of this spectrum of which that is true.
What are the dangers to the sector of the auction process? The sector unanimously agrees that it is impossible for it to enter a simple auction system for spectrum release. It has three main grounds for saying that. In detailing them, I shall deal with some of the comments of the hon. Member for Edinburgh, West (John Barrett).
First, the spectrum cannot organise a bid. It is a disparate and diverse community of content producers, manufacturers, rental organisations and others. Many of its members are extremely small. They do not possess the financial resources, nor is there a mechanism to co-ordinate bidding for the collective needs of the community.
Secondly, there is the nature of the competition. The sector genuinely believes that it could not be successful in securing spectrum at auction. The other bidders have huge financial muscle. The turnover of the entire world-wide radio mike manufacturing industry is approximately £l billion a year. By contrast, Vodafone alone has a turnover of nearly £30 billion. Dell, Hewlett Packard, Microsoft, Apple and many more IT and communications giants will also be bidding.
The third danger is the cost. The certainty of losing in an auction process is increased by the estimated value of the likely bids. Ofcoms supposition that the spectrum is likely to be of only limited value is undermined by both a letter from Dell Corporation about its value and by Vodafones public comments on the implications of the digital dividend.
Worse, with powerful commercial forces up against a disparate sector, there is a genuine prospect of spectrum hoardingland-banking of spectrum for future possible uses. They do not make spectrum any more, and one of the IT giants could decide to take pre-emptive action to squeeze competitors out of the market. That would mean Bye-bye PMSE.
Then there is the question of equipment. It is worth spending some time on that. The suggestion by Ofcom
that around only £10 million worth of equipment would become redundant as part of the DDR is wrong and underestimates the figure by at least a factor of five. One medium-sized company, Autograph Sound, has approximately £7 million worth of affected equipment.
The PMSE sector must be given sufficient time to amortise the value of current equipment that will become redundant. A considerable amount of it will be unsuitable for upgrading because of the restriction of the hazardous substances directive.
Even fully depreciated equipment holds commercial value because of its longevity and the rental nature of part of the sector. Equipment filters down through the industry. Ofcoms proposed changes would abruptly end the life cycle of the equipment by making it redundant.
The timetable for spectrum release must be sufficiently long to allow the manufacturing industry to produce a sufficient quantity of new equipment for the new frequencies. It is an international industry, so it cannot change everything just to suit the British market. It will need time to avoid disruption to production. Anyway, will international artistes really want to abandon the kit that they use everywhere else simply to perform a UK tour?
Ofcom proposes the deregulation of Channel 69, but it may be a bad idea. Existing PMSE needs, as well as those of amateurs, require interference-free use of spectrum. If the PMSE sector continues to use Channel 69 professionally, it is certain that sound production will suffer from interference. It is absolutely fundamental that the spectrum used by the PMSE community should be licensed and co-ordinated by a successor to JFMG.
Ofcoms argument that the current system offers no security of tenure is bizarre. Until the DDR, there was no risk to the sectors use of the spectrum. Ofcom and the review created the risk and now it wants to take the credit for a solution to a problem that it invented.
I believe that market-based, flexible solutions are good, but there are always exceptions, such as the radio astronomers, who could not afford to pay for the spectrum they use. Let us be clear: PMSE users accept that change is inevitable and that that will mean a higher price. I think that they accept Ofcoms view that current prices probably do not even cover the regulators costs, but one does not need the perils of a full auction to correct that. The price could simply be increased.
There must be an acceptable medium-term solution to permit investment in new equipment. The JFMG has an important co-ordinating role that must be protected. Perhaps some appropriate spectrum could be allocated on an annual rental basis to a successor to JFMG. That successor would be independent of Ofcom, which would not therefore be responsible for the organisation. The sector could bid for additional spectrum that it would ideally like, but with the comfort of some security. The new JFMG could charge and police authorised spectrum usage by the PMSE sector. Whatever happens, there must be a smooth transition to the new spectrum allocation world, with a longer time scale than that currently envisaged by Ofcom.
I emphasise that I respect Ofcom, and I am sure that the consultation is genuine and poses it real challenges in balancing competing demands. However, there is not much time left. The sector must come together even
more closely than it has so far to express a coherent view and offer a possible solution to this real problem. Individual points of view, however, are also valuable: short letters making one or two points to Ofcom will have their impact. The consultation ends on 20 March. My appeal to the sector is that it makes its voice heard so that a real danger is prevented.
Earlier, I quoted Patrick Stewart, who is currently playing Prospero in The Tempest. I say to the Minister, and through her to Ofcom, that there will be a tempest of public outrage if this goes wrong. Adapting Prosperos final soliloquy, I say:
I congratulate the hon. Member for Mid-Worcestershire (Peter Luff) on securing this debate. I assure all those who have waited for this Adjournment debate that there is no way in which, as a result of the auction of spectrum, access to Porgy and Bess, Elton John, Cats, the Arctic Monkeys on tour, about which I am sure that my right hon. Friend the Chancellor will be delighted, and Big Brotherwhatever the hon. Gentleman feels about it, I am sure that his constituents will want it to continuewill cease.
The hon. Gentleman has a son at LAMDA, and I have a daughter who is slightly ahead of his son and has ambitions to become a theatre director. I am therefore as conscious as he is of the issue. The right hon. Member for Witney (Mr. Cameron) might have done better without a radio mike, as he might then have avoided some of the flip-flop accusations that Labour Members are constantly able to hurl at him.
More seriously, the Government realise that radio spectrum is a scarce resource. It is of vital importance for the UK in the modern world, and we must carefully consider all the issues that arise. We therefore welcome Ofcoms open and consultative approach, as, I think, does the hon. Gentleman.
In this country, the industries that use spectrum, such as mobile communications and broadcasting, account for about 3 per cent. of the economy, which is a greater share than that of some utilities. As the hon. Gentleman will know, spectrum is also an essential input into numerous public services, from defence to the emergency services, and from scientific research to transport. The demand for spectrum is growing rapidly. In part, that reflects greater innovation in wireless technologies and applications of many different kinds; in part, it stems from the fact that wireless services have unique features that are valued by everyone, such as convenience and mobility.
It is generally agreed that the digital dividend spectrum is among the most valuable spectrum in the UK, offering the right mix of range, penetration and capacity. That unique combination of properties drives the high demand for spectrum. That is the background against which the requirements of specific users must be discussed.
This spectrum has plenty of potential users from many areas, such as community use wireless microphones, which the hon. Gentleman mentioned, more digital terrestrial television, particularly at local level, and high-definition television. Innovative uses are also being developed such as wireless broadband, and there are potential low-power uses that may not yet have reached the market.
Ofcoms duty includes ensuring the optimal use of spectrum for the UK. Both Ofcom and the Governmentand, I think, the hon. Gentlemanare of the opinion that spectrum is most efficiently and effectively allocated via a market mechanism. The rising importance of spectrum, however, means that the way in which it is managed is a vital issue. One of Ofcoms most important objectives is therefore to ensure that the use of spectrum brings as many benefits as possible to UK citizens and consumersthe public duty. I assure him that Ofcom is not driven by any Treasury diktat to extract maximum revenue from spectrum allocation.
As the hon. Gentleman said, the PMSE community currently makes significant use of the digital dividend spectrum to provide all the services that he mentioned. The joint frequency management group manages those assignments on Ofcoms behalf. Various parts of the radio spectrum are made available to JFMG for such use, including current interleaved spectrumthe white spaces between transmittersand Channel 69, to which the hon. Gentleman referred. Owing to improved technology, while the amount of spectrum available may be less after switchover, Ofcom believes that the capacity for potential PMSE use will be approximately the same. I hope the hon. Gentleman is reassured by that.
In its consultation and the policy that it is developing, Ofcom is distinguishing between two categories of PMSE use: professional use, on which the hon. Gentlemans speech focused, and community use, which is very important and involves church halls, community meetings, tennis association meetings and meetings to discuss local issues. Those two categories will be treated differently as we think through the digital review.
Ofcoms consultation makes it clear that it is aware of the concerns of those involved in programme making and special events. The concerns expressed by the hon. Gentleman will be brought to the regulators attention as part of the consultation process. The debate has made a valuable contribution to discussion of this topic, and I hope it will raise awareness among the PMSE community.
In the context of professional use, Ofcom has recognised the risk of disruption to which the hon. Gentleman alluded. That is why it has suggested a phased change in spectrum management. It proposes to require that the spectrum continues to be made available for professional PMSE use until at least 2012, as much as anything to avoid the risk of disruption that
might be caused by the Olympic games. Ofcom has promised to work closely with the professional user community to develop the proposals, and to manage any period of transition that is necessary.
I assure the hon. Gentleman that individual users will not have to organise a bid. I think there has been some misunderstanding about that. What they will have to do is go to a new contractor who will have secured the interleaved spectrum. I agree with the hon. Gentleman that there will be a price impact, partly because the current prices do not entirely cover the cost to the regulator and partly because if the spectrum is auctioned there will be an element of profit. I think that about two thirds of the costs are currently met. New equipment will present a cost, and I agree with the hon. Gentleman that we must ensure that the transition is appropriate.
Ofcom will publish a further discussion document specifically on PMSE after the current consultation, potentially dealing with transitional arrangements. The Government welcome that listening approach on the regulators part, and will be interested in the outcome of any further discussion of any transitional period. We will be interested to hear ideas from those on all sides about potential frameworks for PMSE spectrum use beyond 2012.
Where PMSE is currently used for community use, we recognise that there is a market failure and acknowledge the wider social impact that that could
have on communities. Reserving Channel 69 for wireless microphones and deregulating access for PMSE community users is the proposed solution, and I think that it will work.
The Government recognise that it is important to enable people to use radio microphones appropriately. They are essential not only for on-stage and off-stage entertainment, special events and outside broadcasts, but for churches, schools, colleges and town halls. We acknowledge that the PMSE sector is one of the only current users of the digital dividend review spectrum that is being required to change the way in which it works, and we fully understand the need for a period of transition. However, we are keen for all industries and public-sector bodies to examine their spectrum use, innovating with technology where possible in order to make more efficient and effective use of that spectrum. We also want them to value resources at market rates in order to benefit the United Kingdom as a whole.
We have been working closely with Ofcom both before and during the DDR consultation, and we are taking a keen interest in the responses to that consultation. We are aware of the issues that have been raised today, and we encourage everyone to contact Ofcom. I hope that by working together the regulator and the industry can achieve a workable solution that will benefit United Kingdom citizens and consumers. I can reassure the House that the issue is important to us.